Correlation Between Bitcoin and AE
Can any of the company-specific risk be diversified away by investing in both Bitcoin and AE at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Bitcoin and AE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bitcoin and AE, you can compare the effects of market volatilities on Bitcoin and AE and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Bitcoin with a short position of AE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bitcoin and AE.
Diversification Opportunities for Bitcoin and AE
Weak diversification
The 3 months correlation between Bitcoin and AE is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Bitcoin and AE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AE and Bitcoin is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Bitcoin are associated (or correlated) with AE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AE has no effect on the direction of Bitcoin i.e., Bitcoin and AE go up and down completely randomly.
Pair Corralation between Bitcoin and AE
Assuming the 90 days trading horizon Bitcoin is expected to generate 1.35 times less return on investment than AE. But when comparing it to its historical volatility, Bitcoin is 2.3 times less risky than AE. It trades about 0.45 of its potential returns per unit of risk. AE is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 2.02 in AE on August 25, 2024 and sell it today you would earn a total of 1.20 from holding AE or generate 59.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bitcoin vs. AE
Performance |
| Timeline |
| Bitcoin |
| AE |
Bitcoin and AE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bitcoin and AE
The main advantage of trading using opposite Bitcoin and AE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bitcoin position performs unexpectedly, AE can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in AE will offset losses from the drop in AE's long position.The idea behind Bitcoin and AE pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
Other Complementary Tools
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes |